In Liberal San Francisco, Tech Leaders Brawl Over Tax Proposal to Aid Homeless

October 19, 2018FinanceComments Off on In Liberal San Francisco, Tech Leaders Brawl Over Tax Proposal to Aid Homeless

For months, technology companies in San Francisco have fought a local ballot proposition that would impose taxes on corporations to fund initiatives to help the homeless.

But last week, that unified front crumbled when Marc Benioff, chief executive of Salesforce, the online software company that is the city’s largest private employer, broke from the pack. “Homelessness is all of our responsibility,” he tweeted. Then the billionaire committed $2 million to passing the tax measure and criticized his fellow tech moguls for not caring.

Now San Francisco’s tech community is in an uproar over the initiative, which is known as Proposition C and will be on the ballot on Nov. 6. Venture capitalists and companies including the online payments start-up Stripe are lobbying and donating money to defeat the tax. And Jack Dorsey, chief executive of Twitter and Square, who opposes the measure, has publicly bickered with Mr. Benioff. On Friday, Mr. Dorsey tweeted, “We need to have long term solutions in place, not quick acts to make us feel good for one moment in time.”

The vitriol among tech executives over the proposition has become “awkward,” said Scott Wiener, a Democratic state senator who represents San Francisco and surrounding areas and who is against the tax. Still, he praised the companies for becoming more involved in local politics.

The dispute over Proposition C raises the question of what responsibilities tech companies have for problems in their own backyards. Tech firms often receive blame for exacerbating inequality and driving up property values with their hefty employee pay packages, contributing to homelessness. The question of what these companies may owe their hometowns is magnified because many of them have taken advantage of local tax breaks to spur their own growth.

The debate is playing out beyond San Francisco and Silicon Valley. In Seattle, Amazon objected in May to a city tax that would have funded services for the homeless. After intense opposition, Seattle officials scuttled it.

In San Francisco, some tech companies, including Mr. Dorsey’s Twitter, used tax breaks in 2011, which the city offered to keep them from moving away. In 2012, San Francisco also adjusted its tax code by switching from a payroll tax to a gross receipts tax, a change that favored the tech industry, which spends extravagantly to recruit top engineers.

Many of the tech companies that are against Proposition C declined to comment on the record. Opposing a measure that is aimed at reducing homelessness is tricky for the firms, especially in a city that has the seventh-largest homeless population in the nation, behind cities such as New York and Los Angeles.

But in public comments, Mr. Dorsey and others have argued that San Francisco officials, and not the companies, are best equipped to deal with homelessness. They have said that the city has a new mayor, London Breed, who was elected in June partly on her promise to combat the issue, and that she needs time to deliver on her campaign.

“I’m down to help in any way I can, as long as the mayor has the accountability,” Mr. Dorsey said in an interview. He added that he was not worried about being perceived as opposing support for the homeless, “because it feels like the right thing to do to get into the nuance and bring out more of the concerns.”

Those in favor of the new tax argue that they are not asking tech companies to come up with a strategy to save the homeless. Instead, they said, they simply want to raise taxes on the firms to fund resources. The extra money from the proposition could total $300 million a year and would effectively double the city’s budget for addressing homelessness.

“You’re either for the homeless or you’re not,” Mr. Benioff said in an interview. “Everyone is willing to say it’s a terrible problem and it’s getting worse, but only so many are willing to write a check to make it better.”

Proposition C was put together by the Coalition on Homelessness, a local nonprofit group. The measure is designed to fund short-term shelters, permanent housing and mental health services for the homeless with a gross receipts tax and a payroll tax on companies above a certain size. The city estimated that nearly half of the businesses that would be affected by the tax are in tech and finance.

Sam Lew, policy director of the Coalition on Homelessness, said the proposition was a “no-brainer” because the funding would provide housing.

The measure qualified for the city ballot in July. Polling conducted by the opposition campaign in early September indicated that 56 percent of likely voters favored the tax, but that number decreased to 47 percent when they received opposition messaging.

In August, an executive at Dolby Laboratories, which makes entertainment systems, sent an email to more than 30 technology companies in San Francisco about the measure, asking if they planned to take a stand on it. Other companies on the email included Salesforce, Stripe, Twitter, GitHub, Uber, Lyft, Zendesk, Slack and Yelp.

Executives at Salesforce and Stripe said they would most likely oppose the measure, according to the emails, which were obtained by The New York Times.

In one email, Darryl Yee, Salesforce’s tax chief, said: “I grew up in SF and very much want to address the homeless problem, but the city’s budget already seems pretty healthy, especially when you consider we’re only a population of 800K.”

Michael Yip, Stripe’s head of tax, wrote back that tech companies might make sizable charitable donations to homelessness causes instead, “in hopes that this will be enough to sway the Mayor to publicly oppose this.”

Twitter and Zendesk declined to comment. GitHub and Lyft did not return requests for comment. Yelp said it was “not active” on the issue.

Some tech companies began giving money to the campaign to fight the tax. In September, Stripe donated $20,000 to the “No on C” effort. In an editorial in The San Francisco Chronicle that month, its general counsel, Jon Zieger, wrote that “Prop. C will likely hurt more than it helps” because there was no comprehensive plan to tackle homelessness and the extra money might go nowhere.

Patrick Collison, Stripe’s chief executive, later tweeted that the measure was “poor policy.”

In a statement on Friday, Stripe said that homelessness was complex and that “solutions require careful interventions.” It added, “Anyone who claims that Prop C is a matter of being ‘for the homeless or against them’ is selling a facile falsehood.”

Early this month, Mayor Breed declared that she opposed the proposition, saying it was fiscally irresponsible. “I do not believe doubling what we spend on homelessness without new accountability, when we don’t even spend what we have now efficiently, is good government,” she said in a statement.

Mr. Benioff said early conversations within Salesforce focused on opposing the tax since “all companies are supposed to oppose all taxes. You kind of learn that in business school.” But he changed his mind after talking with his co-chief executive, Keith Block, who often encountered homeless people on his walks to work.

“We said, you know what, I think we have to support this,” Mr. Benioff said. He added that homelessness — not taxes — had become an existential threat to business in the city and that Salesforce might have to leave if the crisis continued.

On Oct. 8, Mr. Benioff announced his $2 million commitment to passing the measure and tweeted his support for the tax.

Mr. Dorsey now plans to give $75,000 to the campaign against the tax, a Square spokesman said. The funding would help spread a more nuanced message about the ballot initiative, Mr. Dorsey said.

Stripe has also recently donated an additional $400,000 to the campaign against the tax, according to public records. Michael Moritz, a venture capitalist at Sequoia Capital, also gave $100,000, according to public records. He did not respond to a request for comment.

Cisco’s chief executive, Chuck Robbins, spoke in support of Mr. Benioff in a statement this week, saying, “We must end the homelessness and housing crises our communities are facing.” He said he was supporting a proposition to fund affordable housing in San Jose, Calif., where Cisco has its headquarters.

In a phone call after their Twitter exchange, Mr. Benioff said, Mr. Dorsey told him that the tax in Proposition C was too high. Mr. Dorsey said he had merely pointed out the disproportionate impact that the tax would have on payment processors like Square. Mr. Benioff estimated Salesforce would pay $10 million annually for the tax; Mr. Dorsey said Square, a much smaller company, would pay $20 million.

Mr. Benioff has since continued taking digs at other San Francisco tech leaders and their stance on Proposition C. “They didn’t know they didn’t like it until they realized I supported it,” he said.

Mr. Dorsey, when asked if he agreed with Mr. Benioff’s characterization of their conversation, responded with a single word: “No.”